Sunday, March 27, 2011

Can You Eliminate Your Tax Debt Through Bankruptcy?

You may have heard that even if you file for bankruptcy, no tax will be able to discharge income. This is simply not true. If taxes are large enough, you may be able to meet all or most of your tax debt. In many cases, the tax liability is not dischargeable because the debt is too new, as explained below, or because taxes are owed on any of the categories that can not be discharged in accordance with the Code of Bankruptcy.

As you may have discovered, the government has some powerful means to collect the taxes due. In addition to taking tax refunds apply to taxes owed, the government can garnish your wages, place a lien on their property, or even seize property and bank accounts, your home or car. Moreover, the longer you leave lying past taxes, the harder it is to pay because the government can continue to add to the debt with interest and penalties. Understanding what past due taxes will be allowed to discharge through bankruptcy can be complicated, so it's a good idea to talk to a lawyer about the past of the corresponding taxes in order to understand when and how bankruptcy can help. Basically, be allowed to meet tax debts that meet certain conditions specified in the Bankruptcy Code.

The first condition is that the tax must have been for three years before bankruptcy. Taxes for 2007, due on April 15, 2008 this requirement is met in bankruptcy filed on April 15, 2011 or later. But what if you get a tax extension? In this case, within three years will be the date of enlargement, not from the original due date. Thus, in the example above, if you received an extension in 2007 taxes until April 15, 2009, taxes would not be eligible for discharge on April 15, 2012.
The second condition is that the tax should have been filed two years before its bankruptcy filing. In reference to this rule, keep in mind that if you file an amended return, the two-year period begins from the date of such amendment.

Third, the tax assessment that preceded the bankruptcy for 240 days ahead of the tax calculation is not always easy, in general, depend on the practices of the relevant tax authority. In general, for federal taxes, the tax assessment will be around the date for filing the return if filed on time. In order to determine the exact date, may obtain a copy of your tax file.
Another condition is that the tax should not be submitted fraudulently. Finally, for a tax debt to be discharged should not be having attempted tax evasion.
If your back taxes meet these conditions, the declaration of bankruptcy can act as a powerful tool for tackling a difficult fiscal responsibility. A bankruptcy attorney will help you take into account their ability to fulfill tax obligations. If you have significant tax debt, do not rule out bankruptcy. Talk with an experienced bankruptcy lawyer today to see if it can meet your tax liability once and for all.

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